Strategic Intent and Creating Value in Partnerships

This last summer I was fortunate enough to sit by the Lausanne lakeside with Alexander Osterwalder, and Alan Smith, co-authors of Business Model Generation, and Value Proposition Design, to review my progress on the Partnership Canvas.

The Partnership Canvas has been gradually spreading throughout the world. I’ve been able to make countless observations on how business practitioners use the tool, how they interact, working in teams, and how the canvas helps to structure a process for collaborative innovation. So, it was high time for some reflection.

A question on Strategic Intent
The discussion with the Alex, and Alan was one that lies at the hart of the issue of creating value through partnerships, namely about its connection to strategic intent.

The experienced business tool makers quickly honed in on the Created Value building block of the Partnership Canvas. They pointed out the necessity of emphasising the relation between a defined strategic intent and the created value in a partnership. These need to be aligned for partnerships to contribute to the core strategic priority of the organisation.

Alex, and Alan’s question on the Partnership Canvas was whether strategic intent, and created value were actually the same thing, or if they were different. I could relate this question to behaviour I’ve seen in workshops with regards to the created value building block, where people tend to conflate intent statements with created value from the partnership.

This question made me realise that the distinction, and the relation between strategic intent, and created value in the Partnership Design process is not obvious, and needs to be addressed explicitly to make the Partnership Canvas more intuitive to apply.

Defining Strategic Intent
Strategic intent is defined by two assessments: Firstly there’s the business model SWOT assessment, which takes into account the interaction between the business environment, and the business model: what are the opportunities, and threats that the business model is facing?

Secondly, defining intent involves understanding the vision behind the business model, and assessing whether there is still a fit between that vision and how the business model is currently set up.

The statement of strategic intent flows from these two assessments. The intent statement explains why to change the business model, and in which direction to take that change.

What is the Created Value of a Partnership?
The created value building block of the Partnership Canvas constitutes the output of the collaboration. By combining value inputs from both partners in a collaboration activity, value is transferred between them. This collaboration enables the creation of a new form of value for each partner, which they can apply to their business model.

Putting Strategic Intent, the Partnership’s Created Value, and Business Model Innovation together
The value that a partnership needs to create is consequent to the definition of strategic intent. Whether the value created in the partnership actually succeeds in serving the strategic intent, is determined by the business model.

“Value is created in the partnership, but needs to captured in the business model”

The created value from the partnership could for instance be an expansion, or deepening of a value proposition, or building a channel together with your partner. But it isn’t until this created value is put to work, that you’ll find out whether you’ll actually meet the objectives you set out with.

So, rather than equating created value from a partnership to strategic intent, the created value is actually the bridge between the intent the business model innovation starts out with, and the outcome of that journey.

Intent-Outcome
Intent ——- Created Value ——- Outcome

An example visualising the link between strategic intent, and creating value in a partnership
To demonstrate the logic of linking strategic intent to the created value of a partnership, I’ll give a partnership example below.

This example concerns the partnership between IBM, and Apple, announced in 2014. For IBM, the strategic intent was to improve their users’ experience, by offering their enterprise-grade secured software on a more user-friendly, and better designed device.

IBM’s business clients’ employees were already carrying their own Apple devices into the office setting, because they preferred Apple’s technology over the non-Apple devices that their employer would equip them with. But there was no way to formally support these devices within the office setting, because IBM couldn’t access them. The partnership, however, enabled IBM to deepen their value proposition by getting access to Apple’s superiorly designed hardware, on which they could run their enterprise-grade secured software.

Apple_IBM
The created value from the IBM-Apple partnership design

For Apple, the intent of the partnership was to get a stronger positioning in the enterprise market for their devices. Essentially Apple is designed to serve a consumer market, which puts the company in a juxtaposition to serving an enterprise market.

Through the partnership with IBM, Apple created the channel they need to sell their computer devices to enterprise customers. This was a breakthrough channel for Apple to the enterprise market, something that might have cost them a decade to build themselves, if they were to achieve it at all.

The question for this partnership does remain how it’s performing up till now. But a peak onto Apple’s website shows that they’ve started engaging with more enterprise partners, expanding the area of application of their devices; an indication that things are moving ahead.

Conclusion
Alex, and Alan’s question on strategic intent in partnerships touched on an issue that I implicitly address when I apply Partnership Design. But having the question on the link between intent, and created value pointed out explicitly, enlightened my thinking on building the strategic argument for partnering, and helping to drive the partnering process towards its intended innovation objective.

The importance of understanding that the created value of a partnership is the bridge between intent, and the business model innovation can’t be overstated. Because being able to get an agreement on a partnership doesn’t imply that you’re also able capture the value that you intended for.

It will always require (repeated) effort to test whether the value from a partnership can actually be captured. The conclusive pass of fail mark for the partnership can only be given after several stints of disciplined business experimentation.

(A great many thanks to Alex, and Alan for the discussion, and taking out the time to dig into the Partnership Canvas!)


Interested in a learn more about Partnership Design?
If you want to learn more about using the partnership canvas, then check out our Partnership Design training options, and other ways we could support you and your team.

You can also join the Partnership Design Linkedin group!

Direct contact? Send an email: info@partnershipcanvas.com

The partnership design process (understand, design, compare, evaluate)

This article the second in part of a series, which was published on LinkedIn (read the first one here)It comes from a collaboration between:
Bart Doorneweert (Partner at Source Institute, and Guest Lecturer Entrepreneurship, Business Model Innovation at Wageningen University)
and
Wim Vanhaverbeke (Professor at Hasselt University, and Visiting Professor at ESADE Business School) 

When working on changing a business model, partnerships are one amongst an alternative of paths you can choose. In this blog post we will discuss when it starts making sense to pursue the path of a partnership as a way forward. We’ll also discuss how to structure the design process. We’ll do that, by using the partnership canvas in combination with the business model canvas. Lastly, we’ll close off with thoughts on how to define some of the critical hypotheses around impact to your business model, and setting the balance right for value capture for both partners.

First questions about partnership intent
The drive for business model innovation always starts with the customer. The question is how the customer experience can be expanded, or deepened through changes to the business model, eg. new features to the product, convenience in delivery, new pricing/payment options, etc.

Based on this idea, the next question is how to operationalize this change. Does the company go for it alone, or will it require a partnership to best effectuate the business model change? To consider whether having a partner on board makes sense or not, we’ve designed the partnership intent puzzle. The following questions need to be asked:

Functionality: do customers expect you to create and deliver it?
Market sizing: is your addressable market large enough?
Time to market: is time to market pressing, and can you launch quickly enough?
Resources: do you have the skill set, time, and budget to develop the functionality internally?

These are the essential 4 factors you need to consider, to determine whether you’re in the most suitable position to launch an innovation yourself, or whether you need a partner. By defining the type of innovation you’re looking for, and the need for a partner, you have a solid definition of intent for your partnership.

The partnership design process
Defining intent will be the starting point for searching, and shortlisting potential partners. These partners will need to meet the initial criteria you have defined around the innovation you want to achieve for your customers (eg. a new channel to reach a new audience, a new production resource to make your product more affordable, or ramp up production volumes, etc).

Based on this shortlist, your design process will start to find out whether you can make a match with a partner. This partnership design process consists of four steps, which we’ll go through below:

Understand
You will need to map out each business model of your potential partners to understand how their business currently works. Then, in the same way that you have defined your intent, the question is what could be the intent for your partner to collaborate. What can you spot regarding constraints they’re struggling with, or an opportunity they can’t quite grasp? By taking time to analyze each of the partners’ business models, both sides of the table will have an understanding where each party is coming from.

Business Model Value Exchange
Value exchange between two business models

Design
Once you understand your intended partner’s business model, and they understand yours, then you can begin to design a partnership structure. This explains what you think is your perspective on a potential partnership. Your partner will also create their version of the story.

You can use the partnership canvas for designing the partnership story in combination with your, and your partner’s business model (leaf through the slides above). Your value offer should be based on what’s present in your business model. The desired asset is a quality that your partner would possess. Created value relates to what you need for your business model (it is already defined by your intent definition). Lastly, to round off the partnership logic, you need to define how you will make these values mutually accessible through the transfer activities.

Compare
The critical phase in the partnership discussion is to create alignment between your partner and yourself on the partnership. Is the value that you offer something that your partner is looking for in you, and is the value you desire from a partner something that this partner is willing to offer? And, lastly, can you come to an agreement on how you will grant mutual access to these values through the transfer activities?

Mirroring

By mirroring the partnership canvasses, each representing a perspective from each partner, you will have that critical discussion to see if you can reach alignment. It is also a step where you might surprise each other about some new idea to add to the collaboration, something you wouldn’t have conceived of on your own.

Evaluate
After alignment has been created on the partnership structure, an evaluation needs to take place about the impact that the partnership will have on each partner’s business model. Without a satisfactory impact to both partners, the partnership will likely dissipate. Therefore, doing the check to define clear hypotheses about the partnership, and making sure that both partners understand them, is crucial.

To understand the impact of the partnership, you need to lay out both partners’ business models, and the partnership. With this overview, the following aspects need to be evaluated, namely (1) the value check, and (2) the cost check:

    1. Where does the created value from the partnership add to each business model? What will its effects be? For instance creating an additional channel will bring in new customers, and likely generate an increase in revenue. Or creating an addition to your value proposition enables you to upsell your products, and command a higher price in the market. Trace the upside for each partner, and make these assumptions explicit
      Created Value CheckLikewise you will also need to evaluate the flipside of the partnership. The partnership might entail that you need to do something extra to activate the new value that is created for your business model. Will you require extra investment or incur extra costs on your end to activate this value, or not?
    1. Running a partnership can sometimes require significant costs for a business. These costs are located within the transfer activity of the partnership. To estimate this cost-effect, you have to ask yourself whether the transfer activity will have a significant effect to your business model’s key activities, and resources. If so, will you bear the full costs for it? Or, can you get your partner to compensate you, or is there some other way you can share the load? Important questions for creating an equitable relationship.Transfer Act Check

The power of the partnership canvas
If the exercise mentioned above comes out positive, you will have arrived at a foundation of your partnership agreement. Both sides of the table will have a clear conception of what their contribution will be, how it will work, and what they will get out of it. Innovation can now be achieved through making two business models operate in interdependence.

Ideally a partnership will not require too much cost or investment from either of the partners to operationalize it. However, it could turn out that there is an in imbalance between the partners. One partner could turn out to require a lot of investment in the partnership or is not able to capture much of the value, while the other partner has comparatively little costs, and investment to make, and stands to gain a lot from the deal. Such imbalance could break the partnership opportunity.

Regardless of the outcome, the key asset of the partnership canvas is that it allows you to figure out these details at an early stage. You can design experiments, and judge the potential of a partnership, even before it has been formally negotiated and implemented. The exercise above can be done as a simulation session with your team, preparing for a partnership discussion. But you can also do this with your actual partner in the room, and jointly sculpt the deal. For the full summary, you can download the partnership design process slides.

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